AUTOLIV INC - Quarter Report: 2015 June (Form 10-Q)

AUTOLIV INC - Quarter Report: 2015 June (Form 10-Q)

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2015

Commission File No.: 001-12933

AUTOLIV, INC.

(Exact name of registrant as specified in its charter)


Delaware		51-0378542
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Vasagatan 11, 7^th floor, SE-111 20,
Box 70381,
SE-107 24 Stockholm, Sweden		N/A
(Address of principal executive offices)		(Zip Code)

+46 8 587 20 600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: x No: ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: x No: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ¨ No: x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of July 13, 2015, there were 88,050,138 shares of common stock of Autoliv, Inc., par value $1.00 per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that Autoliv, Inc. (“Autoliv,” the “Company” or “we”) or its management believes or anticipates may occur in the future. For example, forward-looking statements include, without limitation, statements relating to industry trends (including light vehicle production), business opportunities, sales contracts, sales backlog, and on-going commercial arrangements and discussions, as well as any statements about estimated sales, estimated operating margin, effective tax rate or other future operating performance or financial results.

In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “will,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words.

All forward-looking statements, including without limitation, management’s examination of historical operating trends and data, are based upon our current expectations, various assumptions and data available from third parties. Our expectations and assumptions are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements.

Because these forward-looking statements involve risks and uncertainties, the outcomes could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation: changes in light vehicle production; fluctuations in vehicle production schedules for which the Company is a supplier; market acceptance of our new products; changes in general industry market conditions or regional growth or declines; changes in and the successful execution of our capacity alignment, restructuring and cost reduction initiatives discussed herein and the market reaction thereto; changes in general industry market conditions or regional growth or declines; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies; consolidations or restructuring; divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; component shortages; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in program awards and performance; the financial results of companies in

which Autoliv has made technology investments or joint-venture arrangements; pricing negotiations with customers; our ability to be awarded new business; product liability, warranty and recall claims and other litigation and customer reactions thereto; higher expenses for our pension and other postretirement benefits including higher funding requirements of our pension plans; work stoppages or other labor issues at our facilities or at the facilities of our customers or suppliers; possible adverse results of pending or future litigation or infringement claims; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business (including securities or other litigation); tax assessments by governmental authorities; dependence on key personnel; legislative or regulatory changes limiting our business; political conditions; dependence on customers and suppliers; and other risks and uncertainties identified in Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 19, 2015. The Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events.

For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to update any such statement.

INDEX


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
1	Basis of Presentation	9
2	Recently Issued Accounting Pronouncements	9
3	Fair Value Measurement	10
4	Income Taxes	13
5	Inventories	13
6	Goodwill	13
7	Restructuring	14
8	Product-Related Liabilities	14
9	Retirement Plans	15
10	Controlling and Non-Controlling Interest	16
11	Contingent Liabilities	16
12	Earnings Per Share	19
13	Segment Information	19
14	Subsequent Events	20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		21

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		35

ITEM 4. CONTROLS AND PROCEDURES		35

PART II - OTHER INFORMATION		35

ITEM 1. LEGAL PROCEEDINGS		35

ITEM 1A. RISK FACTORS		36

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		36

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		36

ITEM 4. MINE SAFETY DISCLOSURES		36

ITEM 5. OTHER INFORMATION		36

ITEM 6. EXHIBITS		37

CONSOLIDATED STATEMENTS OF NET INCOME (UNAUDITED)

(Dollars in millions, except per share data)


	Three months ended						Six months ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014

Net sales	$	2,291.5		$	2,383.0		$	4,465.6		$	4,678.8

Cost of sales		(1,831.5	)		(1,918.8	)		(3,582.3	)		(3,769.3	)

Gross profit		460.0			464.2			883.3			909.5

Selling, general and administrative expenses		(101.2	)		(104.6	)		(201.8	)		(207.1	)
Research, development and engineering expenses, net		(140.3	)		(134.8	)		(266.8	)		(277.0	)
Amortization of intangibles		(3.3	)		(4.2	)		(7.0	)		(8.3	)
Other income (expense), net		(6.5	)		(81.2	)		(119.0	)		(86.0	)

Operating income		208.7			139.4			288.7			331.1

Income from equity method investments		1.6			2.7			2.9			4.4
Interest income		0.6			1.3			1.0			2.5
Interest expense		(16.9	)		(17.8	)		(34.0	)		(25.8	)
Other non-operating items, net		0.5			(2.7	)		0.4			(5.0	)

Income before income taxes		194.5			122.9			259.0			307.2

Income tax expense		(57.7	)		(39.7	)		(86.5	)		(92.9	)

Net income	$	136.8		$	83.2		$	172.5		$	214.3

Less: Net income attributable to non-controlling interest		0.1			0.4			0.1			1.2

Net income attributable to controlling interest	$	136.7		$	82.8		$	172.4		$	213.1

Net earnings per share – basic	$	1.55		$	0.89		$	1.95		$	2.28
Net earnings per share – diluted	$	1.55		$	0.89		$	1.95		$	2.27

Weighted average number of shares outstanding, net of treasury shares (in millions)		88.0			93.2			88.2			93.6

Weighted average number of shares outstanding, assuming dilution and net of treasury shares (in millions)		88.3			93.5			88.4			93.9

Number of shares outstanding, excluding dilution and net of treasury shares (in millions)		88.1			92.8			88.1			92.8

Cash dividend per share – declared	$	0.56		$	0.54		$	1.12		$	1.06
Cash dividend per share – paid	$	0.56		$	0.52		$	1.10		$	1.04

See “Notes to unaudited condensed consolidated financial statements.”

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in millions)


	Three months ended						Six months ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014

Net income	$	136.8		$	83.2		$	172.5		$	214.3

Other comprehensive income (loss) before tax:
Change in cumulative translation adjustments		20.1			(0.7	)		(90.7	)		(2.3	)
Net change in cash flow hedges		(0.6	)		—			(0.6	)		—
Net change in unrealized components of defined benefit plans		2.1			0.3			4.3			0.2

Other comprehensive income (loss), before tax		21.6			(0.4	)		(87.0	)		(2.1	)

Tax effect allocated to other comprehensive income (loss)		(0.4	)		0.0			(1.1	)		0.0

Other comprehensive income (loss), net of tax		21.2			(0.4	)		(88.1	)		(2.1	)

Comprehensive income	$	158.0		$	82.8		$	84.4		$	212.2

Less: Comprehensive income attributable to non-controlling interest		0.1			0.4			0.1			0.8

Comprehensive income attributable to controlling interest	$	157.9		$	82.4		$	84.3		$	211.4

See “Notes to unaudited condensed consolidated financial statements.”

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)


	As of
	June 30, 2015 (unaudited)			December 31, 2014
Assets
Cash and cash equivalents	$	1,323.3		$	1,529.0
Receivables, net		1,795.7			1,706.3
Inventories, net		684.1			675.5
Other current assets		241.0			225.4

Total current assets		4,044.1			4,136.2

Property, plant and equipment, net		1,434.1			1,390.2
Investments and other non-current assets		270.1			255.3
Goodwill		1,586.7			1,594.0
Intangible assets, net		70.4			67.2

Total assets	$	7,405.4		$	7,442.9

Liabilities and equity
Short-term debt	$	93.2		$	79.6
Accounts payable		1,127.3			1,091.5
Accrued expenses		793.3			720.1
Other current liabilities		211.5			247.4

Total current liabilities		2,225.3			2,138.6

Long-term debt		1,505.6			1,521.2
Pension liability		229.4			232.5
Other non-current liabilities		104.1			108.5

Total non-current liabilities		1,839.1			1,862.2

Common stock		102.8			102.8
Additional paid-in capital		1,329.3			1,329.3
Retained earnings		3,314.0			3,240.0
Accumulated other comprehensive (loss) income		(341.2	)		(253.0	)
Treasury stock		(1,079.0	)		(992.0	)

Total controlling interest		3,325.9			3,427.1
Non-controlling interest		15.1			15.0

Total equity		3,341.0			3,442.1

Total liabilities and equity	$	7,405.4		$	7,442.9

See “Notes to unaudited condensed consolidated financial statements.”

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in millions)


	Six months ended
	June 30, 2015			June 30, 2014

Operating activities
Net income	$	172.5		$	214.3
Depreciation and amortization		149.5			150.6
Other, net		(14.7	)		(0.8	)
Changes in operating assets and liabilities		(69.4	)		(93.1	)


Net cash provided by operating activities		237.9			271.0

Investing activities
Expenditures for property, plant and equipment		(250.0	)		(208.4	)
Proceeds from sale of property, plant and equipment		12.7			1.0
Acquisitions and divestitures of businesses and other, net		(9.0	)		(1.7	)


Net cash used in investing activities		(246.3	)		(209.1	)

Financing activities
Net increase in short-term debt		21.6			(96.8	)
Issuance of long-term debt		—			1,253.0
Repayments and other changes in long-term debt		(8.4	)		(0.7	)
Dividends paid to non-controlling interest		—			(3.4	)
Dividends paid		(97.1	)		(97.2	)
Repurchased shares		(104.4	)		(191.5	)
Common stock options exercised		15.6			22.1
Other, net		0.1			0.2


Net cash (used in) provided by financing activities		(172.6	)		885.7

Effect of exchange rate changes on cash and cash equivalents		(24.7	)		(5.7	)


(Decrease) increase in cash and cash equivalents		(205.7	)		941.9

Cash and cash equivalents at beginning of period		1,529.0			1,118.3


Cash and cash equivalents at end of period	$	1,323.3		$	2,060.2

See “Notes to unaudited condensed consolidated financial statements.”

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are presented in millions of dollars, except for per share amounts)

June 30, 2015

1 Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, unaudited condensed consolidated financial statements have been prepared on the same basis as the prior year audited financial statements and all adjustments considered necessary for a fair presentation have been included in the financial statements. All such adjustments are of a normal recurring nature. The result for the interim period is not necessarily indicative of the results to be expected for any future period or for the fiscal year ending December 31, 2015. Certain prior-year amounts have been reclassified to conform to current year presentation.

The Condensed Consolidated Balance Sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements.

Statements in this report that are not of historical fact are forward-looking statements that involve risks and uncertainties that could affect the actual results of the Company. A description of the important factors that could cause Autoliv’s actual results to differ materially from the forward-looking statements contained in this report may be found in this report and Autoliv’s other reports filed with the Securities and Exchange Commission (the “SEC”). For further information, refer to the consolidated financial statements, footnotes and definitions thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 19, 2015.

2 Recently Issued Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB), issued the Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs, that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. For public business entities, the final guidance will be effective for fiscal years beginning after 15 December 2015, however, early adoption (including in interim periods) is permitted. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. An entity is also required in the year of adoption to provide certain disclosures about the change in accounting principle, including the nature of and reason for the change, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability). The Company plans to adopt this standard beginning January 1, 2016. The adoption of this standard is not expected to have a material impact for any period presented.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, that requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. The standard will be effective for annual periods after December 15, 2016 and for annual periods and interim periods thereafter. Early adoption is permitted. The Company early adopted the standard in its interim reporting for September 30, 2014; however the adoption of ASU 2014-15 had no impact on the Company’s disclosures in the unaudited condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), that will supersede nearly all existing revenue recognition guidance under US GAAP. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard was to originally be effective for public entities for annual and interim periods beginning after December 15, 2016. On July 9, 2015 the FASB decided to defer by one year the effective dates of the new standard for both public and nonpublic entities reporting under US GAAP. Early adoption would be permitted for all entities, but not before the original public entity effective date (i.e. annual and interim periods beginning after December 15, 2016). The FASB still needs to issue an Accounting Standards Update to change the effective date. The Company is currently in the process of evaluating which adoption method to use and assessing the potential impact the new standard will have on its operations and consolidated financial statements.

3 Fair Value Measurement

Assets and liabilities measured at fair value on a recurring basis

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities and short-term debt approximate their fair value because of the short term maturity of these instruments.

The Company uses derivative financial instruments, “derivatives”, as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. The derivatives outstanding at June 30, 2015 were foreign exchange swaps and forward contracts. All swaps principally match the terms and maturity of the underlying debt and no swaps have a maturity beyond six months. The forward contracts are designated as cash flow hedges of certain external purchases. All derivatives are recognized in the consolidated financial statements at fair value. Certain derivatives are from time to time designated either as fair value hedges or cash flow hedges in line with the hedge accounting criteria. For certain other derivatives hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest and foreign exchange rates.

When a hedge is classified as a fair value hedge, the change in the fair value of the hedge is recognized in the Consolidated Statement of Net Income along with the off-setting change in the fair value of the hedged item. When a hedge is classified as a cash flow hedge, any change in the fair value of the hedge is initially recorded in equity as a component of Other Comprehensive Income (OCI) and reclassified into the Consolidated Statement of Net Income when the hedge transaction affects net earnings. The Company uses the forward rate with respect to the measurement of changes in fair value of cash flow hedges when revaluing foreign exchange forward contracts. There were no material reclassifications from OCI to the Consolidated Statement of Income during the six months ended June 30, 2015. There has been no ineffectiveness. There were no derivatives designated as hedging instruments outstanding as of December 31, 2014.

The Company’s derivatives are all classified as Level 2 of the fair value hierarchy and there have been no transfers between the levels during this or comparable periods.

The tables below present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014. The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements (ISDA agreements) with all derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheet at June 30, 2015 and in the Consolidated Balance Sheet at December 31, 2014, have been presented on a gross basis. The net amounts subject to netting agreements that the Company choose not to offset are presented in footnotes. According to the close-out netting agreements, transaction amounts payable to a counterparty on the same date and in the same currency can be netted.


	June 30, 2015
				Fair Value Measurements
Description	Nominal volume			Derivative asset			Derivative liability			Balance sheet location

Derivatives designated as hedging instruments ¹⁾

Foreign Exchange Forward Contracts, less than 1 year (cash flow hedge)	$	62.6		$	0.0		$	0.4		Other current assets/ Other current liabilities

Foreign Exchange Forward Contracts, less than 2 year (cash flow hedge)		26.8			0.0			0.2		Other non-current assets/ Other non-current liabilities

Total derivatives designated as hedging instruments	$	89.4		$	0.0		$	0.6

Derivatives not designated as hedging instruments

Foreign exchange swaps, less than 6 months	$	324.2	²⁾	$	0.2	³⁾	$	1.0	⁴⁾	Other current assets/ Other current liabilities
Total derivatives not designated as hedging instruments	$	324.2		$	0.2		$	1.0

¹⁾ There is no netting since there are no offsetting contracts.

²⁾ Net nominal amount after deducting for offsetting swaps under ISDA agreements is $268.2 million.

³⁾ Net amount after deducting for offsetting swaps under ISDA agreements is $0.2 million.

⁴⁾ Net amount after deducting for offsetting swaps under ISDA agreements is $0.9 million.


	December 31, 2014
				Fair Value Measurements
Description	Nominal volume			Derivative asset			Derivative liability			Balance sheet location

Derivatives designated as hedging instruments ¹⁾

Foreign Exchange Forward Contracts, less than 1 year (cash flow hedge)	$	—		$	—		$	—		Other current assets/ Other current liabilities

Foreign Exchange Forward Contracts, less than 2 year (cash flow hedge)		—			—			—		Other non-current assets/ Other non-current liabilities

Total derivatives designated as hedging instruments	$	—		$	—		$	—

Derivatives not designated as hedging instruments

Foreign exchange swaps, less than 6 months	$	459.1	²⁾	$	1.3	³⁾	$	0.4	⁴⁾	Other current assets/ Other current liabilities

Total derivatives not designated as hedging instruments	$	459.1		$	1.3		$	0.4

¹⁾ There is no netting since there are no offsetting contracts.

²⁾ Net nominal amount after deducting for offsetting swaps under ISDA agreements is $390.9 million.

³⁾ Net amount after deducting for offsetting swaps under ISDA agreements is $1.3 million.

⁴⁾ Net amount after deducting for offsetting swaps under ISDA agreements is $0.4 million.

Derivatives designated as hedging instruments

The derivatives designated as hedging instruments outstanding at June 30, 2015 were Foreign Exchange Forward Contracts, classified as cash flow hedges. For the three and six months ended June 30, 2015, the gains and losses recognized in OCI on derivative effective portion, net were a loss of $0.3 million and a loss of $0.3 million, respectively, for derivative instruments designated as hedging instruments less than 1 year. For the three and six months ended June 30, 2015, the gains and losses recognized in OCI on derivative effective portion, net were a loss of $0.1 million and a loss of $0.1 million, respectively, for derivative instruments designated as hedging instruments less than 2 years.

For the three and six months ended June 30, 2014, there were no derivative instruments designated as hedging instruments.

For the three and six months ended June 30, 2015 and June 30, 2014, there were no gains and losses recognized in the Consolidated Statement of Net Income.

Derivatives not designated as hedging instruments

All amounts recognized in the Consolidated Statement of Net Income related to derivatives, not designated as hedging instruments, relate to economic hedges and thus have been materially off-set by an opposite Consolidated Statement of Net Income effect of the related financial liabilities or financial assets. The derivatives not designated as hedging instruments outstanding at June 30, 2015 were foreign exchange swaps. For the three and six months ended June 30, 2015, the gains and losses recognized in other financial items, net were a gain of $0.7 million and a loss of $1.6 million, respectively, for derivative instruments not designated as hedging instruments. For the three and six months ended June 30, 2014, the gains and losses recognized in other financial items, net were a loss of $0.5 million and a gain of $1.1 million, respectively, for derivative instruments not designated as hedging instruments. For the three and six months ended June 30, 2015 and June 30, 2014, the gains and losses recognized as interest expense were immaterial.

Fair Value of Debt

The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the Company’s current borrowing rates for similar types of financing. The fair value of derivatives is estimated using a discounted cash flow method based on quoted market prices. The fair value and carrying value of debt is summarized in the table below. The Company has determined that each of these fair value measurements of debt reside within Level 2 of the fair value hierarchy. The discount rates for all derivative contracts are based on bank deposit or swap interest rates. Credit risk has been considered when determining the discount rates used for the derivative contracts.


Long-term debt	June 30, 2015 Carrying value¹)		June 30, 2015 Fair value		December 31, 2014 Carrying value¹)		December 31, 2014 Fair value
U.S. Private placement	$	1,422.8	$	1,473.7	$	1,424.2	$	1,510.2
Medium-term notes		78.8		81.3		83.2		86.3
Other long-term debt		4.0		4.0		13.8		13.8

Total	$	1,505.6	$	1,559.0	$	1,521.2	$	1,610.3


Short-term debt
Overdrafts and other short-term debt	$	76.8	$	76.8	$	57.8	$	57.8
Short-term portion of long-term debt		16.4		16.4		21.8		21.8

Total	$	93.2	$	93.2	$	79.6	$	79.6

1) Debt as reported in balance sheet.

Assets and liabilities measured at fair value on a non-recurring basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a non-recurring basis. Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, including equity method investments.

The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To determine the fair value of long-lived assets, the Company utilizes the projected cash flows expected to be generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets.

For the three and six month periods ended June 30, 2015, the Company did not record any impairment charges on its long-lived assets.

4 Income Taxes

The effective tax rate in the second quarter of 2015 was 29.7% compared to 32.3% in the same quarter of 2014. Discrete tax items, net had a favorable impact of 4.3%, primarily related to the resolution of a prior year tax refund claim. In the second quarter of 2014, discrete tax items, net increased the tax rate by 2.0%.

The effective tax rate in the first six months of 2015 was 33.4% compared to 30.2% for the first six months of 2014. In the first six months of 2015, the net impact of discrete tax items caused a 0.7% decrease to the effective tax rate. The net impact of discrete tax items in the first six months of 2014 caused a 0.7% increase to the effective tax rate.

For the three and six month periods ended June 30, 2015, the tax rate is also negatively impacted by an unfavorable mix of earnings and tax rates by various jurisdictions compared to the same periods in the prior year.

The Company files income tax returns in the United States federal jurisdiction, various state jurisdictions and foreign jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2009. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2007.

As of June 30, 2015 the Company is not aware of any proposed income tax adjustments resulting from tax examinations that would have a material impact on the Company’s condensed consolidated financial statements. The conclusion of such audits could result in additional increases or decreases to unrecognized tax benefits in some future period or periods.

During the second quarter of 2015, the Company recorded a net increase of $1.1 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current year, including accruing additional interest related to unrecognized tax benefits of prior years. In addition, the Company recorded a net decrease to income tax reserves for unrecognized tax benefits of $1.4 million relating to settlements paid to tax authorities. Of the total unrecognized tax benefits of $27.5 million recorded at June 30, 2015, $7.7 million is classified as current tax payable and $19.8 million is classified as non-current tax payable on the Condensed Consolidated Balance Sheet.

5 Inventories

Inventories are stated at the lower of cost (principally FIFO) or market. The components of inventories were as follows:


	As of
	June 30, 2015			December 31, 2014
Raw materials	$	323.0		$	312.2
Work in progress		236.4			240.6
Finished products		209.3			206.0

Inventories		768.7			758.8
Inventory valuation reserve		(84.6	)		(83.3	)

Total inventories, net of reserve	$	684.1		$	675.5

6 Goodwill

Due to the new segment reporting effective as of January 1, 2015, the goodwill allocated to the previous reporting unit Passive Safety Systems has been reallocated to the new segments, Passive Safety and Electronics. The allocation was made based on the relative fair values of the two new businesses transferred as of January 1, 2015, see table below. The estimated relative fair values of the businesses transferred were determined using the discounted cash flow method taking into account expected long-term operating cash flow performance (for further information, see Note 1, Summary of significant accounting policies, in the Company’s Annual Report on Form 10-K). The amount of goodwill held in the previous Active Safety Systems reporting unit was allocated to the new Electronics segment as this old reporting unit rolls up fully into the new Electronics segment.

The Company’s impairment testing will be based on the new segments: 1) Passive Safety and 2) Electronics.


Goodwill
Previous reporting units	Passive Safety Systems			Active Safety Systems¹⁾		Total
Balance December 31, 2014	$	1,586.2		$	7.8	$	1,594.0

New segments	Passive Safety			Electronics¹⁾		Total
Balance January 1, 2015 before goodwill reallocation	$	1,586.2		$	7.8	$	1,594.0
Allocation of goodwill due to change in segment reporting		(185.7	)		185.7		—
Balance January 1, 2015 after goodwill reallocation	$	1,400.5		$	193.5	$	1,594.0
Effect of currency translation		(7.3	)		—		(7.3	)
Balance June 30, 2015	$	1,393.2		$	193.5	$	1,586.7

1) As of January 1, 2015, the goodwill amount related to the reporting unit Active Safety Systems was allocated to the Electronics segment, shown in the table above.

7 Restructuring

Restructuring provisions are made on a case-by-case basis and primarily include severance costs incurred in connection with headcount reductions and plant consolidations. The Company expects to finance restructuring programs over the next several years through cash generated from its ongoing operations or through cash available under existing credit facilities. The Company does not expect that the execution of these activities will have a material adverse impact on its liquidity position.

Second quarter of 2015

The employee-related restructuring provisions in the second quarter of 2015 mainly related to headcount reductions in high-cost countries in Europe. The cash payments mainly related to headcount reductions in high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from March 31, 2015 to June 30, 2015.


	March 31, 2015		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference		June 30, 2015
Restructuring employee-related	$	79.3	$	7.4	$	(0.9	)	$	(6.7	)	$	2.8	$	81.9
Other		—		0.2		—			(0.2	)		—		—

Total reserve	$	79.3	$	7.6	$	(0.9	)	$	(6.9	)	$	2.8	$	81.9

First quarter of 2015

The employee-related restructuring provisions and cash payments in the first quarter of 2015 mainly related to headcount reductions in high-cost countries in Europe. The changes in the employee-related reserves were charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2014 to March 31, 2015.


	December 31, 2014		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference			March 31, 2015
Restructuring employee-related	$	79.6	$	35.5	$	(0.9	)	$	(25.9	)	$	(9.0	)	$	79.3
Other		0.2		0.1		—			(0.3	)		—			—

Total reserve	$	79.8	$	35.6	$	(0.9	)	$	(26.2	)	$	(9.0	)	$	79.3

2014

In 2014, the employee-related restructuring provisions and cash payments mainly related to headcount reductions in high-cost countries in Europe. The changes in the employee-related reserves have been charged against Other income (expense), net in the Consolidated Statements of Net Income. The table below summarizes the change in the balance sheet position of the restructuring reserves from December 31, 2013 to December 31, 2014.


	December 31, 2013		Provision/ Charge		Provision/ Reversal			Cash payments			Translation difference			December 31, 2014
Restructuring employee-related	$	93.9	$	42.6	$	(2.3	)	$	(44.2	)	$	(10.4	)	$	79.6
Other		0.3		0.2		(0.0	)		(0.3	)		0.0			0.2

Total reserve	$	94.2	$	42.8	$	(2.3	)	$	(44.5	)	$	(10.4	)	$	79.8

8 Product-Related Liabilities

The Company has reserves for product risks. Such reserves are related to product performance issues including recall, product liability and warranty issues. For further explanation, see Note 11 Contingent Liabilities below.

The table below summarizes the change in the balance sheet position of the product-related liabilities. The provisions for the three and six months ended June 30, 2015 mainly relate to recall related issues. The cash paid for the three and six months ended June 30, 2015 mainly relate to recall related issues. The provisions for the three months ended June 30, 2014 mainly relate to recall related issues. The provisions for the six months ended June 30, 2014 mainly relate to warranty related issues. The cash paid for the three and six months ended June 30, 2014 mainly relate to warranty related issues.


	Three months ended						Six months ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
Reserve at beginning of the period	$	47.2		$	40.8		$	51.3		$	36.4
Change in reserve		23.1			9.3			24.9			16.6
Cash payments		(7.7	)		(2.7	)		(12.2	)		(5.4	)
Translation difference		0.3			0.3			(1.1	)		0.1

Reserve at end of the period	$	62.9		$	47.7		$	62.9		$	47.7

9 Retirement Plans

The Company has contributory and non-contributory defined benefit pension plans covering employees at most operations in the United States and in certain other countries. The main plan is the U.S. plan for which the benefits are based on an average of the employee’s earnings in the years preceding retirement and on credited service. Certain supplemental funded and unfunded plan arrangements also provide retirement benefits to specified groups of participants.

The Company has frozen participation in the U.S. pension plans to include only those employees hired as of December 31, 2003. The U.K. defined benefit plan is the most significant individual non-U.S. pension plan and the Company has frozen participation to include only those employees hired as of April 30, 2003.

The Net Periodic Benefit Costs related to Other Post-retirement Benefits were not significant to the condensed consolidated financial statements of the Company for the three and six month periods ended June 30, 2015 and June 30, 2014 and are not included in the table below.

For further information on Pension Plans and Other Post-retirement Benefits, see Note 18 to the Consolidated Financial Statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 19, 2015.

The components of total Net Periodic Benefit Cost associated with the Company’s defined benefit retirement plans are as follows:


	Three months ended						Six months ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
Service cost	$	5.8		$	5.2		$	11.6		$	10.5
Interest cost		5.2			5.4			10.5			10.7
Expected return on plan assets		(5.4	)		(5.0	)		(10.7	)		(10.0	)
Amortization prior service credit		(0.1	)		(0.2	)		(0.3	)		(0.4	)
Amortization of actuarial loss		2.5			0.8			5.0			1.5

Net Periodic Benefit Cost	$	8.0		$	6.2		$	16.1		$	12.3

10 Controlling and Non-Controlling Interest


	Three Months ended
	June 30, 2015									June 30, 2014
	Equity attributable to									Equity attributable to
	Controlling interest			Non- controlling interest			Total			Controlling interest			Non- controlling interest			Total

Balance at beginning of period	$	3,210.6		$	15.0		$	3,225.6		$	3,983.5		$	16.4		$	3,999.9

Total Comprehensive Income:
Net income		136.7			0.1			136.8			82.8			0.4			83.2

Foreign currency translation		20.1			(0.0	)		20.1			(0.7	)		(0.0	)		(0.7	)
Net change in cash flow hedges		(0.4	)		—			(0.4	)		—			—			—
Defined benefit pension plan		1.5			—			1.5			0.3			—			0.3

Total Comprehensive Income		157.9			0.1			158.0			82.4			0.4			82.8
Common Stock incentives		6.5			—			6.5			7.7			—			7.7
Cash dividends declared		(49.1	)		—			(49.1	)		(49.5	)		—			(49.5	)
Repurchased shares		—			—			—			(97.2	)		—			(97.2	)
Dividends paid to non-controlling interests on subsidiary shares		—			—			—			—			(0.3	)		(0.3	)


Balance at end of period	$	3,325.9		$	15.1		$	3,341.0		$	3,926.9		$	16.5		$	3,943.4


	Six Months ended
	June 30 2015									June 30, 2014
	Equity attributable to									Equity attributable to
	Controlling interest			Non- controlling interest			Total			Controlling interest			Non- controlling interest			Total

Balance at beginning of period	$	3,427.1		$	15.0		$	3,442.1		$	3,981.3		$	19.1		$	4,000.4

Total Comprehensive Income:
Net income		172.4			0.1			172.5			213.1			1.2			214.3

Foreign currency translation		(90.7	)		(0.0	)		(90.7	)		(1.9	)		(0.4	)		(2.3	)
Net change in cash flow hedges		(0.4	)		—			(0.4	)		—			—			—
Defined benefit pension plan		3.0			—			3.0			0.2			—			0.2

Total Comprehensive Income		84.3			0.1			84.4			211.4			0.8			212.2
Common Stock incentives		17.4			—			17.4			24.0			—			24.0
Cash dividends declared		(98.5	)		—			(98.5	)		(98.3	)		—			(98.3	)
Repurchased shares		(104.4	)		—			(104.4	)		(191.5	)		—			(191.5	)
Dividends paid to non-controlling interests on subsidiary shares		—			—			—			—			(3.4	)		(3.4	)


Balance at end of period	$	3,325.9		$	15.1		$	3,341.0		$	3,926.9		$	16.5		$	3,943.4

11 Contingent Liabilities

Legal Proceedings

Various claims, lawsuits and proceedings are pending or threatened against the Company or its subsidiaries, covering a range of matters that arise in the ordinary course of its business activities with respect to commercial, product liability and other matters. Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, and with the exception of losses resulting from the antitrust proceedings described below, it is the opinion of management that the various legal proceedings and investigations to which the Company currently is a party will not have a material adverse impact on the consolidated financial position and cash flows of Autoliv, but the Company cannot provide assurance that Autoliv will not experience material litigation, product liability or other losses in the future.

In October 2014, one of the Company’s Brazilian subsidiaries received a notice of deficiency from the state tax authorities from the state of São Paulo, Brazil which, primarily, alleged violations of ICMS (VAT) payments and improper warehousing documentation. The aggregate assessment for all alleged violations was R$58 million (approximately $18.5 million), inclusive of fines, penalties and interest. The Company believes the full amount assessed is baseless, that it has reasonable legal and factual defenses to the assessment and, consequently, plans to defend its interests vigorously. The duration or ultimate outcome of the matter currently cannot be predicted or estimated at this time, including an estimate of the amount of loss or range of loss, and no accrual for the assessment has been made as of June 30, 2015.

In March 2015, the Company was informed of an investigation being conducted in Turkey by the Directorate of Kocaeli Customs Custody, Smuggling and Enquiry into the Company’s import and customs payment structure and the associated import taxes and fees for the period of 2006–2012. The Company cannot predict the duration, scope or ultimate outcome of this investigation and is unable to estimate the financial impact it may have, or predict the reporting periods in which any such financial impacts may be recorded. Consequently, the Company has made no provision for any expenses as of June 30, 2015 with respect to this investigation.

Antitrust Matters

Authorities in several jurisdictions are currently conducting broad, and in some cases, long-running investigations of suspected anti-competitive behavior among parts suppliers in the global automotive vehicle industry. These investigations include, but are not limited to, segments in which the Company operates. In addition to pending matters, authorities of other countries with significant light vehicle manufacturing or sales may initiate similar investigations. It is the Company’s policy to cooperate with governmental investigations.

On February 8, 2011, a Company subsidiary received a grand jury subpoena from the Antitrust Division of the U.S. Department of Justice (“DOJ”) related to its investigation of anti-competitive behavior among suppliers of occupant safety systems. On June 6, 2012, the Company entered into a plea agreement with the DOJ and subsequently pled guilty to two counts of antitrust law violations involving a Japanese subsidiary and paid a fine of $14.5 million.

On June 7-9, 2011, representatives of the European Commission (“EC”), the European antitrust authority, visited two facilities of a Company subsidiary in Germany to gather information for a similar investigation. The investigation is still pending and the Company remains unable to estimate the financial impact such investigation will have or predict the reporting periods in which such financial impact may be recorded and has consequently not recorded a provision for loss as of June 30, 2015. However, management has concluded that it is probable that the Company’s operating results and cash flows will be materially adversely impacted for the reporting periods in which the EC investigation is resolved or becomes estimable.

In August 2014, the Competition Commission of South Africa (the “CCSA”) contacted the Company regarding an investigation into the Company’s sales of occupant safety systems in South Africa. The Company is cooperating with the CCSA. The Company cannot predict the duration, scope or ultimate outcome of this investigation and the Company is unable to estimate the loss or a range of loss, or predict the reporting periods in which any such loss may be recorded. Consequently, the Company has not recorded a provision for loss as of June 30, 2015 with respect to this investigation. Also, since the Company’s plea agreement with the DOJ involved the actions of employees of a Japanese subsidiary of the Company, the Japan Fair Trade Commission is evaluating whether to initiate an investigation.

On July 6, 2015, the Company learned that the General Superintendence of the Administrative Council for Economic Defense (“CADE”) in Brazil had initiated an investigation of an alleged cartel involving sales in Brazil of seatbelts, airbags and steering wheels by the Company’s Brazilian subsidiary and the Brazilian subsidiary of a competitor. The Company’s policy is to cooperate with governmental investigations. The Company cannot predict the duration, scope or ultimate outcome of this matter, including the amount of a possible loss or range of loss. The Company has not recorded a provision for loss as of June 30, 2015 with respect to this investigation.

The Company is also subject to civil litigation alleging anti-competitive conduct in the U.S. and Canada. Plaintiffs in these civil antitrust class actions generally allege that the defendant suppliers of occupant safety systems have engaged in long-running global conspiracies to fix the prices of occupant safety systems or components thereof in violation of various antitrust laws and unfair or deceptive trade practice statutes. Plaintiffs in these civil antitrust class actions make allegations that extend significantly beyond the specific admissions of the Company’s DOJ plea. The Company denies these overly broad allegations. Plaintiffs in the U.S. cases seek to represent purported classes of direct purchasers, auto dealers and end-payors (i.e. consumers) who purchased occupant safety systems or components either directly from a defendant or indirectly through purchases or leases of new vehicles containing such systems. Plaintiffs seek injunctive relief, treble damages, costs and attorneys’ fees. Plaintiffs in the Canadian cases seek to represent purported classes encompassing direct and indirect purchasers of such products and seek similar relief under applicable Canadian laws.

Specifically, the Company, several of its subsidiaries and its competitors are defendants in a total of nineteen purported antitrust class action lawsuits filed between July 2012 and June 2015. Fifteen of these lawsuits were filed in the U.S. and have been consolidated in the Occupant Safety Systems (OSS) segment of the Automobile Parts Antitrust Litigation, a Multi-District Litigation (MDL) proceeding in the United States District Court for the Eastern District of Michigan.

On May 30, 2014, the Company, without admitting any liability, entered into separate settlement agreements with representatives of each of the three classes of plaintiffs in the MDL, not including the recent truck dealer class action described below, subject to final approval by the MDL court following notice to the settlement class, an opportunity to object or opt-out of the settlement, and a fairness hearing. Pursuant to the settlement agreements, the Company agreed to pay $40 million to the direct purchaser settlement class, $6 million to the auto dealer settlement class, and $19 million to the end-payor settlement class, for a total of $65 million. This amount was expensed during the second quarter of 2014. In exchange, the plaintiffs agreed that the plaintiffs and the settlement classes would release Autoliv from all claims regarding their U.S. purchases that were or could have been asserted on behalf of the class in the MDL. In July 2014, the three settlements received preliminary court approval. Following notice to the direct purchaser settlement class and the receipt of opt-out notices from members of that class, the class settlement amount was by the terms of the settlement agreement reduced to approximately $35.5 million. Following a fairness hearing on December 3, 2014, the MDL court on January 7, 2015 entered an order granting final approval to the direct purchaser class settlement. Notices to the settlement classes and the fairness hearings for the other two class settlements have been deferred by the plaintiffs and the MDL court for processing with additional, future settlements due to the cost of giving notice to large settlement classes. The three class settlements will not resolve any claims of settlement class members who opt out of the settlements or the claims of any purchasers of occupant safety systems who are not otherwise included in a settlement class, such as states and municipalities.

In March 2015, Autoliv reached agreements regarding additional settlements to resolve certain direct purchasers’ global (including U.S.) or non-U.S. antitrust claims which were not covered by its U.S. direct purchaser settlement described above. The total amount of these additional settlements was $81 million. In entering into these agreements, Autoliv did not admit any liability and settled for the purpose of avoiding the uncertainty, risk, expense and distraction of potential litigation or other adversarial proceedings and in the interest of maintaining positive relationships with its customers.

In June 2015, a class action lawsuit was filed against the Company in the United States District Court for the Eastern District of Michigan by truck dealers seeking to represent a class of truck and equipment dealers that directly or indirectly purchased occupant safety products in the U.S. As in the other class actions, plaintiffs generally alleged that the Company and its competitors who were also named as defendants have engaged in long-running global conspiracies to fix the prices of the subject products in violation of antitrust laws and unfair or deceptive trade practice statues. Plaintiffs are seeking treble damages for their direct purchases and for their indirect purchases in states whose laws permit antitrust damages claims by indirect purchasers. This lawsuit was assigned to the MDL court and will be processed as part of the MDL. The Company is currently unable to predict the duration or ultimate outcome of this lawsuit and the Company cannot estimate the financial impact this class action will have, including an amount of loss or range of loss. No provision for a loss has been recorded as of June 30, 2015.

The remaining four antitrust class action lawsuits are pending in Canada (Sheridan Chevrolet Cadillac Ltd. et al. v. Autoliv, Inc. et al., filed in the Ontario Superior Court of Justice on January 18, 2013; M. Serge Asselin v. Autoliv, Inc. et al., filed in the Superior Court of Quebec on March 14, 2013; Ewert v. Autoliv, Inc. et al., filed in the Supreme Court of British Columbia on July 18, 2013; and Cindy Retallick and Jagjeet Singh Rajput v. Autoliv ASP, Inc. et al., filed in the Queen’s Bench of the Judicial Center of Regina in the province of Saskatchewan on May 14, 2014). The Canadian cases assert claims on behalf of putative classes of both direct and indirect purchasers of occupant safety systems. The Company denies the overly broad allegations of these lawsuits and intends to defend itself in these cases. While it is probable that the Company will incur losses as a result of these Canadian antitrust cases, the duration or ultimate outcome of these cases currently cannot be predicted or estimated and no provision for a loss has been recorded as of June 30, 2015. There is currently no timeline for class certification or discovery in the Canadian cases. These class actions have been stayed pending proceedings in certain earlier-filed auto parts cases.

Product Warranty, Recalls and Intellectual Property

Autoliv is exposed to various claims for damages and compensation if products fail to perform as expected. Such claims can be made, and result in costs and other losses to the Company, even where the product is eventually found to have functioned properly. Where a product (actually or allegedly) fails to perform as expected the Company faces warranty and recall claims. Where such (actual or alleged) failure results, or is alleged to result, in bodily injury and/or property damage, the Company may also face product-liability claims. There can be no assurance that the Company will not experience material warranty, recall or product (or other) liability claims or losses in the future, or that the Company will not incur significant costs to defend against such claims. The Company may be required to participate in a recall involving its products. Each vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. A warranty, recall or product-liability claim brought against the Company in excess of its insurance may have a material adverse effect on the Company’s business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Company responsible for some, or all, of the repair or replacement costs of products when the product supplied did not perform as represented by us or expected by the customer. Accordingly, the future costs of warranty claims by the customers may be material. However, the Company believes its established reserves are adequate to cover potential warranty settlements. Autoliv’s warranty reserves are based upon the Company’s best estimates of amounts necessary to settle future and existing claims. The Company regularly evaluates the adequacy of these reserves, and adjusts them when appropriate. However, the final amounts determined to be due related to these matters could differ materially from the Company’s recorded estimates.

In addition, the global platforms and procedures used by vehicle manufacturers have led to quality performance evaluations being conducted on an increasingly global basis. Any one or more quality, warranty or other recall issue(s) (including those affecting few units and/or having a small financial impact) may cause a vehicle manufacturer to implement measures such as a temporary or prolonged suspension of new orders, which may have a material impact on the Company’s results of operations.

The Company believes that it is currently reasonably insured against recall and product liability risks, at levels sufficient to cover potential claims that are reasonably likely to arise in the Company’s businesses based on past experience. Autoliv cannot assure that the level of coverage will be sufficient to cover every possible claim that can arise in our businesses, now or in the future, or that such coverage always will be available should we, now or in the future, wish to extend or increase insurance.

In its products, the Company utilizes technologies which may be subject to intellectual property rights of third parties. While the Company does seek to procure the necessary rights to utilize intellectual property rights associated with its products, it may fail to do so. Where the Company so fails, the Company may be exposed to material claims from the owners of such rights. Where the Company has sold products which infringe upon such rights, its customers may be entitled to be indemnified by the Company for the claims they suffer as a result thereof. Such claims could be material.

The table in Note 8 Product-Related Liabilities above summarizes the change in the balance sheet position of the product related liabilities for the three and six month periods ended June 30, 2015 and June 30, 2014.

12 Earnings per share

The Company calculates basic earnings per share (EPS) by dividing net income attributable to controlling interest by the weighted-average number of shares of common stock outstanding for the period (net of treasury shares). When it would not be antidilutive (such as during periods of net loss), the diluted EPS also reflects the potential dilution that could occur if common stock were issued for awards under the Stock Incentive Plan.

For the three and six months ended June 30, 2015, approximately 2 thousand shares of common stock, respectively, were not included in the computation of the diluted EPS, which could potentially dilute basic EPS in the future.

During the three months ended March 31, 2015 and March 31, 2014 approximately 0.2 million and 0.3 million shares of common stock, respectively, from the treasury stock have been utilized by the Stock Incentive Plan.

During the six months ended June 30, 2015 and June 30, 2014 approximately 0.2 million and 0.4 million shares of common stock, respectively, from the treasury stock have been utilized by the Stock Incentive Plan.

Actual weighted average shares used in calculating earnings per share were:

(In millions)

Three months ended

Six months ended

June 30,
2015

June 30,
2014

June 30,
2015

June 30,
2014

Weighted average shares basic

88.0

93.2

88.2

93.6

Effect of dilutive securities: - stock options/share awards

0.3

0.2

0.3

Weighted average shares diluted

88.3

93.5

88.4

93.9

13 Segment Information

As of January 1, 2015 the Company changed its operating structure and now has two operating segments, Passive Safety and Electronics. Passive Safety includes Autoliv’s airbag and seatbelt businesses, while Electronics combines all of Autoliv’s electronics resources and expertise in both passive safety electronics and active safety. The change in operating structure, by integrating the passive electronics and active safety businesses into the new segment Electronics, has been made in order to more efficiently manage the Company’s business operations and allow for future growth. Additionally, changes made to the internal financial information and operating results of the new operating segments are regularly reviewed by the Company’s chief operating decision maker to assess the performance of the individual operating segments and make decisions about resources to be allocated to the operating segments. The Company began reporting its results under the two new operating segments, Passive Safety and Electronics, commencing with its quarterly report for the period ending March 31, 2015. The Company has also recasted the corresponding items of segment information for the three and six month periods ended June 30, 2014 as set forth below.


	Three months ended						Six months ended
Net sales, including Intersegment Sales	June 30,			June 30,			June 30,			June 30,
*(Dollars in millions)*	2015			2014			2015			2014
Passive Safety	$	1,925.3		$	2,013.8		$	3,755.7		$	3,965.3
Electronics		377.1			380.5		$	728.3		$	735.3
Total segment sales	$	2,302.4		$	2,394.3		$	4,484.0		$	4,700.6
Corporate and other		2.9			5.2			7.1			9.2
Intersegment sales		(13.8	)		(16.5	)		(25.5	)		(31.0	)
Total net sales	$	2,291.5		$	2,383.0		$	4,465.6		$	4,678.8


	Three months ended						Six months ended
Income before Income Taxes	June 30,			June 30,			June 30,			June 30,
*(Dollars in millions)*	2015			2014			2015			2014
Passive Safety	$	195.7		$	110.3		$	258.9		$	266.0
Electronics		11.9			18.1		$	20.9		$	36.8
Segment operating income	$	207.6		$	128.4		$	279.8		$	302.8
Corporate and other		1.1			11.0			8.9			28.3
Interest and other non-operating expenses, net		(15.8	)		(19.2	)		(32.6	)		(28.3	)
Income from equity method investments		1.6			2.7			2.9			4.4
Income before income taxes	$	194.5		$	122.9		$	259.0		$	307.2


	Three months ended				Six months ended
Capital Expenditures	June 30,		June 30,		June 30,		June 30,
*(Dollars in millions)*	2015		2014		2015		2014
Passive Safety	$	101.2	$	97.1	$	222.4	$	177.5
Electronics		13.1		18.0		24.7		30.5
Corporate and other		0.9		0.1		2.9		0.4
Total capital expenditures	$	115.2	$	115.2	$	250.0	$	208.4


	Three months ended				Six months ended
Depreciation and Amortization	June 30,		June 30,		June 30,		June 30,
*(Dollars in millions)*	2015		2014		2015		2014
Passive Safety	$	63.7	$	64.3	$	125.5	$	126.2
Electronics		11.1		11.1		21.8		21.5
Corporate and other		1.0		1.4		2.2		2.9
Total depreciation and amortization	$	75.8	$	76.8	$	149.5	$	150.6


	As of
Segment Assets	June 30,		December 31,
*(Dollars in millions)*	2015		2014
Passive Safety	$	5,590.8	$	5,782.3
Electronics		787.8		713.9
Segment assets	$	6,378.6	$	6,496.2
Corporate and other¹⁾		1,026.8		946.7
Total assets	$	7,405.4	$	7,442.9

1) Corporate and other assets mainly consist of cash and cash equivalents, income taxes and equity method investments.

14 Subsequent Events

There were no reportable events subsequent to June 30, 2015.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the United States Securities and Exchange Commission (the “SEC”) on February 19, 2015. Unless otherwise noted, all dollar amounts are in millions.

Autoliv, Inc. (“Autoliv” or the “Company”) is a Delaware corporation with its principal executive offices in Stockholm, Sweden. It was created from the merger of Autoliv AB (“AAB”) and the automotive safety products business of Morton International, Inc., in 1997. The Company functions as a holding corporation and owns two principal subsidiaries, AAB and Autoliv ASP, Inc.

Autoliv is a leading developer, manufacturer and supplier of automotive safety systems to the automotive industry with a broad range of product offerings, including passive safety systems and active safety systems. Passive safety systems are primarily meant to improve vehicle safety, and include modules and components for passenger and driver-side airbags, side-impact airbag protection systems, seatbelts, steering wheels, passive safety electronics, whiplash protection systems and child seats, and components for such systems. Active safety products include automotive radars, night driving assist, camera-based vision systems, active seatbelts and brake controls.

Autoliv’s filings with the SEC, which include this Quarterly Report on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, insider transaction reports on Forms 3 and 4 and all related amendments, are made available free of charge on our corporate website at www.autoliv.com and are available as soon as reasonably practicable after they are electronically filed with the SEC.

Shares of Autoliv common stock are traded on the New York Stock Exchange under the symbol “ALV”. Swedish Depository Receipts representing shares of Autoliv common stock (“SDRs”) trade on NASDAQ OMX Stockholm under the symbol “ALIV SDB”, and options in SDRs trade on the same exchange under the name “Autoliv SDB”. Options in Autoliv shares are traded on NASDAQ OMX Philadelphia and NYSE Amex Options under the symbol “ALV”. Our fiscal year ends on December 31.

EXECUTIVE OVERVIEW

The Company’s strong organic sales growth (non-U.S. GAAP measure) continued in the second quarter of 2015. The Company’s ability to continue to grow even when a growth market such as China slows down, demonstrates its global strength. Europe and North America were the drivers, showing solid, balanced increases for both passive and active safety products.

The Company recently entered into two important agreements. One is a license agreement with Volvo Car Corporation which will enable the Company to broaden its active safety offering and improve its time to market for several important features for active safety and automation. The second is a definitive agreement to acquire the automotive business of MACOM which will expand the Company’s capabilities in active safety through the addition of GPS module related products. Together these two initiatives bring further important building blocks for preventive safety and the automated driving system of the future car.

The Company continues to see positive signs in Western Europe, but it is still a long way from the all-time high. The Company is executing on its capacity alignment program and increasing its efforts further in order to create an effective future European footprint. In North America, the total light vehicle production shows only modest growth, however the market seems stable with monthly annualized sales volumes of around 17 million vehicles. This situation is beneficial for the Company as it can optimize production for high capacity utilization.

High interest in active safety products in both Europe and North America led to strong organic growth (non-U.S. GAAP measure) of 28% year to date. To a large extent this was driven by more attractive offerings from car manufacturers and more consumers selecting various active safety packages when buying new vehicles which drives growth.

There is uncertainty regarding the market development in China and the Company is taking action to address the situation. The Company is implementing tight cost controls and at the same time continuing its investment and engineering efforts in China. These measures will enable the Company to fully capitalize on the long term growth which it believes the Chinese light vehicle market will enjoy. In the short term the Company is negatively affected by the slowdown in vehicle production, lower delivery volumes from launches and negative vehicle mix including model transitions.

The recall of defective inflators produced by another supplier continues and the Company is focused on supporting its customers as needed. Currently, the Company estimates that it will deliver up to 20 million inflators mainly in 2015 and 2016, but it is very difficult to determine the final delivery volumes.

Non-U.S. GAAP financial measures

Some of the following discussions refer to non-U.S. GAAP financial measures: see “Organic sales”, “Operating working capital”, “Net debt (cash)” and “Leverage ratio”. Management believes that these non-U.S. GAAP financial measures assist investors in analyzing trends in the Company’s business. Additional descriptions regarding management’s use of these financial measures are included below. Investors should consider these non-U.S. GAAP financial measures in addition to, rather than as a substitute for, financial reporting measures prepared in accordance with U.S. GAAP. These historical non-U.S. GAAP financial measures have been identified as applicable in each section of this report with a tabular presentation reconciling them to U.S. GAAP. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.

RESULTS OF OPERATIONS

Overview

The following table shows some of the key ratios. Management uses these measures internally as a means of analyzing the Company’s current and future financial performance and our core operations as well as identifying trends in our financial conditions and results of operations. We have provided this information to investors to assist in meaningful comparisons of past and present operating results and to assist in highlighting the results of ongoing core operations. These ratios are more fully explained in our MD&A discussion below and should be read in conjunction with the consolidated financial statements in our annual report and the unaudited condensed consolidated financial statements in this quarterly report.

KEY RATIOS

(Dollars in millions, except per share data)


	Three months ended or as of June 30					Six months ended or as of June 30
	2015		2014			2015		2014

Total parent shareholders’ equity per share	$	37.75	$	42.32		$	37.75	$	42.32
Operating working capital ¹⁾	$	639	$	640		$	639	$	640
Capital employed ⁶⁾	$	3,610	$	3,647		$	3,610	$	3,647
Net debt (cash) ¹⁾	$	269	$	(296	)	$	269	$	(296	)
Net debt to capitalization, % ¹¹⁾		7		n/a			7		n/a

Gross margin, % ²⁾		20.1		19.5			19.8		19.4
Operating margin, % ³⁾		9.1		5.8			6.5		7.1

Return on total equity, % ⁷⁾		16.7		8.4			10.3		10.8
Return on capital employed, % ⁸⁾		23.7		15.8			16.5		18.9

No. of employees at period-end ⁹⁾		52,536		48,613			52,536		48,613
Headcount at period-end ¹⁰⁾		62,018		58,810			62,018		58,810
Days receivables outstanding ⁴⁾		72		71			74		72
Days inventory outstanding ⁵⁾		31		30			32		30

1) See tabular presentation reconciling this non-U.S. GAAP measure to U.S. GAAP below under the heading “Liquidity and Sources of Capital”

2) Gross profit relative to sales

3) Operating income relative to sales

4) Outstanding receivables relative to average daily sales

5) Outstanding inventory relative to average daily sales

6) Total equity and net debt

7) Net income relative to average total equity

8) Operating income and equity in earnings of affiliates, relative to average capital employed

9) Employees with a continuous employment agreement, recalculated to full time equivalent heads

10) Employees plus temporary, hourly workers

11) Net debt in relation to capital employed

THREE MONTHS ENDED JUNE 30, 2015 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2014

Market overview

Light Vehicle Production Development


Change vs. same quarter last year
	China			Japan			RoA			Americas			Europe			Total
LVP¹⁾		2.2	%		(10.8	)%		1.3	%		(0.9	)%		0.5	%		(0.3	)%

1) Source: IHS July 16, 2015.

During the three month period from April to June 2015, global LVP is estimated by IHS to have been virtually flat compared to the same quarter in 2014. This was down 1pp from IHS’s expectation at the beginning of the quarter.

In China, which accounts for around 16% of Autoliv’s sales, LVP grew by more than 2%, more than 6pp less than the April estimate.

In Japan, which accounts for around 7% of Autoliv’s sales, LVP declined by close to 11%, more than 2pp worse than the April estimate.

In the RoA, which represents 10% of Autoliv’s sales, LVP increased by more than 1%, 3pp better than the April estimate.

In the Americas, which accounts for around one third of Autoliv’s sales, LVP declined by less than 1%, more than 2pp worse than in the April estimate. In North America, LVP increased by more than 2%, which was in line with the April estimate. In South America, the decline was 17%, close to 12pp more than the decline expected in IHS’s April estimate.

In Europe, where Autoliv currently generates around one third of its sales, LVP increased by less than 1%, which was more than 2pp better than IHS’s April estimate. In Western Europe, LVP grew by more than 4%, in Eastern Europe, LVP declined by close to 7%, both 2pp better than the April estimate.

Consolidated Sales

The Company has substantial operations outside the United States and at the present time approximately 75% of its sales are denominated in currencies other than the U.S. dollar. This makes the Company and its performance in regions outside the United States sensitive to changes in U.S. dollar exchange rates when translated. The measure “Organic sales” presents the increase or decrease in the Company’s overall U.S. dollar net sales on a comparative basis, allowing separate discussion of the impacts of acquisitions/divestments and exchange rate fluctuations and our ongoing core operations and results. The tabular reconciliation below presents the change in “Organic sales” reconciled to the change in the total net sales as can be derived from our unaudited financial statements.

Consolidated sales declined by close to 4% to $2,292 million compared to $2,383 million in the same quarter of 2014. Excluding negative currency translation effects of $237 million, the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was 6.1%, compared to the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) of “around 6%” expected at the beginning of the quarter.

Sales by Product


*Change vs. same quarter last year*			Reported (U.S. GAAP)			Currency effects¹⁾			Organic change³⁾
	Sales (MUSD)		Reported (U.S. GAAP)			Currency effects¹⁾			Organic change³⁾
Airbags²⁾	$	1,264.0		(2.3	)%		(9.4	)%		7.1	%
Seatbelts²⁾		664.0		(8.3	)%		(11.2	)%		2.9	%
Passive Safety Electronics		231.4		(6.1	)%		(6.8	)%		0.7	%
Active Safety		132.1		12.0	%		(13.6	)%		25.6	%
Total	$	2,291.5		(3.8	)%		(9.9	)%		6.1	%

1) Effects from currency translations. 2) Including Corporate and other sales. 3) Non-GAAP measure, see reconciliation table below.

The organic sales growth (non-U.S. GAAP measure, see reconciliation table below) of airbag products (including steering wheels) was mainly driven by driver airbags and inflatable curtains in Europe and North America, steering wheels in Europe and increased replacement inflator sales.

The organic sales growth (non-U.S. GAAP measure, see reconciliation table below) in seatbelt products was a result of strong sales growth in North America and Europe, partly offset by lower sales in China and Japan. The trend of higher sales for more advanced and higher value-added seatbelt systems continued globally.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) for passive safety electronics products (mainly airbag control modules and remote sensing units) grew strongly in South Korea, offset by a sales decline in Japan. Other markets were virtually flat.

The strong organic sales growth (non-U.S. GAAP measure, see reconciliation table below) for active safety products (automotive radars, night vision systems and cameras with driver assist systems) was driven by radar and vision systems. Radar related products particularly contributed, primarily as a result of Mercedes’ increased demand for driving assistance products. Sales of vision systems to BMW also contributed.

Reconciliation of the change in “Organic sales” to U.S. GAAP financial measure

Components of net sales increase (decrease)

Three months ended June 30, 2015

(Dollars in millions)


	Airbag Products²⁾						Seatbelt Products²⁾						Passive Safety Electronics						Active Safety						Total
	%			$			%			$			%			$			%			$			%			$
Organic change		7.1		$	92.3			2.9		$	21.0			0.7		$	1.6			25.6		$	30.2			6.1		$	145.1
Currency effects¹⁾		(9.4	)		(122.6	)		(11.2	)		(81.4	)		(6.8	)		(16.6	)		(13.6	)		(16.0	)		(9.9	)		(236.6	)

Reported change		(2.3	)	$	(30.3	)		(8.3	)	$	(60.4	)		(6.1	)	$	(15.0	)		12.0		$	14.2			(3.8	)	$	(91.5	)

1) Effects from currency translations. 2) Including Corporate and other sales.

Sales by Region


*Change vs. same quarter last year*
		Sales (MUSD)		Reported (U.S. GAAP)			Currency effects¹⁾			Organic change²⁾
Asia		$	758.0		(3.2	)%		(5.1	)%		1.9	%
Whereof:	China	$	365.7		(2.8	)%		0.3	%		(3.1	)%
	Japan	$	154.1		(13.9	)%		(15.9	)%		2.0	%
	Rest of Asia	$	238.2		4.4	%		(5.8	)%		10.2	%
Americas		$	821.8		3.7	%		(4.5	)%		8.2	%
Europe		$	711.7		(11.8	)%		(19.8	)%		8.0	%
Global		$	2,291.5		(3.8	)%		(9.9	)%		6.1	%

1) Effects from currency translations. 2) Non-U.S. GAAP measure, see reconciliation table below.

The organic sales growth (non-U.S. GAAP measure, see reconciliation table below) of more than 6% in the quarter was mainly a result of strong growth in Europe and North America, particularly to non-US OEMs, which was partly offset by an organic sales decline in China.

Autoliv’s sales in Asia in the quarter were $758 million.

Sales from Autoliv’s companies in China declined organically (non-U.S. GAAP measure, see reconciliation table below) by more than 3% in the quarter. The decline was a result of an unfavorable vehicle mix and model transitions with global OEMs, which was partly mitigated by sales growth with Chinese OEMs.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) from Autoliv’s companies in Japan increased by 2% in the quarter. The sales increase was mainly due to inflator replacement sales but also due to strong growth with models from Nissan and Lexus, which was partly mitigated by sales decreases for models from Mitsubishi and Honda.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) from Autoliv’s companies in the Rest of Asia (RoA) grew by more than 10% in the quarter. This was primarily driven by sales increases in South Korea, particularly for models from Hyundai, Kia and Nissan. In Thailand, models from Mitsubishi and Isuzu also contributed to the growth. The growth was partly mitigated by lower sales for models from Samsung and Chevrolet.

For Autoliv’s companies in the Americas, the sales development was mixed for the quarter. In North America, strong organic sales growth (non-U.S. GAAP measure) of almost 9% was mainly driven by Asian and European brands, particularly models from Honda, Acura, Kia and Mercedes. Sales of replacement inflators also contributed to the growth. Sales in South America (Brazil) declined due to a 17% drop in LVP mainly affecting Autoliv through lower sales to models from Ford, GM and Fiat.

The strong organic sales growth (non-U.S. GAAP measure, see reconciliation table below) of 8% in the quarter from Autoliv’s companies in Europe was driven by sales increases for a number of OEMs, positive product mix and active safety products. Primary drivers were models from VW, Mercedes, Fiat and Jeep.

Reconciliation of the change in “Organic sales” to U.S. GAAP financial measure

Components of net sales increase (decrease)

Three months ended June 30, 2015

(Dollars in millions)


	China						Japan						RoA						Americas						Europe						Total
	%			$			%			$			%			$			%			$			%			$			%			$
Organic change		(3.1	)	$	(11.8	)		2.0		$	3.6			10.2		$	23.4			8.2		$	65.2			8.0		$	64.7			6.1		$	145.1
Currency effects¹⁾		0.3			1.3			(15.9	)		(28.5	)		(5.8	)		(13.3	)		(4.5	)		(36.2	)		(19.8	)		(159.9	)		(9.9	)		(236.6	)

Reported change		(2.8	)	$	(10.5	)		(13.9	)	$	(24.9	)		4.4		$	10.1			3.7		$	29.0			(11.8	)	$	(95.2	)		(3.8	)	$	(91.5	)

1) Effects from currency translations.

Earnings


(Dollars in millions, except per share data)	Three months ended June 30, 2015			Three months ended June 30, 2014			Change
Net Sales	$	2,291.5		$	2,383.0			(3.8)	%

Gross profit	$	460.0		$	464.2			(0.9)	%
% of sales		20.1	%		19.5	%		0.6pp

S,G&A	$	(101.2)		$	(104.6)			(3.3)	%
% of sales		(4.4)	%		(4.4)	%		0.0pp

R,D&E net	$	(140.3)		$	(134.8)			4.0	%
% of sales		(6.1)	%		(5.7)	%		(0.4)pp

Operating income	$	208.7		$	139.4			49.7	%
% of sales		9.1	%		5.8	%		3.3pp

Income before taxes	$	194.5		$	122.9			58.3	%

Tax rate		29.7	%		32.3	%		(2.6)pp

Net income	$	136.8		$	83.2			64.4	%

Net income attributable to controlling interest	$	136.7		$	82.8			65.0	%

Earnings per share, diluted¹⁾	$	1.55		$	0.89			74.2	%

1) Assuming dilution and net of treasury shares.

The gross profit for the second quarter 2015 was slightly lower than the same quarter 2014, primarily as a result of negative currency translation impacts. However, the gross margin improved by 0.6pp to 20.1%, from 19.5% in the same quarter 2014, mainly as a result of positive product mix, favorable currency effects, and raw material savings. These positive effects were partly offset by costs related to the investments for capacity and growth.

Operating income increased by $69 million to $209 million, or 9.1% of sales. The second quarter of 2014 was negatively affected by around $70 million for costs related to settlements for class actions in the United States.

Selling, General and Administrative (S,G&A) expenses decreased by more than $3 million.

Research, Development & Engineering (R,D&E) expenses, net increased by more than $5 million compared to the same quarter in the prior year. At comparable currency rates the increase in R,D&E, net was almost $20 million or 0.4pp.

Costs of $7 million related to capacity alignments and close to $1 million related to antitrust matters reduced operating margin by 0.4pp in the second quarter, compared to 3.5pp in the same quarter of 2014.

Income before taxes increased by $72 million. Income attributable to controlling interest was $137 million, an increase of $54 million from the second quarter of 2014.

The effective tax rate in the second quarter of 2015 was 29.7% compared to 32.3% in the same quarter of 2014. Discrete items, net decreased the tax rate in the quarter by 4.3pp. In the second quarter of 2014, discrete tax items net and an unfavorable mix increased the tax rate by 2.0pp.

Earnings per share (EPS) was $1.55 compared to $0.89 for the same period one year ago. The EPS was positively affected by 49 cents from lower costs for capacity alignments and antitrust matters, 9 cents by lower number of shares outstanding, 6 cents by higher operating income and 5 cents by lower effective tax rate. These positive effect were partly offset by 7 cents from negative currency translation effects.

The weighted average number of shares outstanding assuming dilution decreased to 88.3 million compared to 93.5 million in the second quarter of 2014 mainly due to the share repurchase program.

SIX MONTHS ENDED JUNE 30, 2015 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2014

Market overview

Light Vehicle Production Development


Year over year change
	China			Japan			RoA			Americas			Europe			Total
LVP¹⁾		6.3	%		(9.1	)%		0.6	%		(1.2	)%		2.2	%		1.3	%

1) Source: IHS July 16, 2015.

For the first six months of 2015, global LVP is estimated by IHS to have increased by more than 1% compared to the first six months of 2014. This was in line with IHS’s expectation from the beginning of the year.

In China, which accounts for around 16% of Autoliv’s sales, LVP grew by more than 6%, a decrease of 1pp compared to the January 2015 estimate.

In Japan, which accounts for around 7% of Autoliv’s sales, LVP declined by more than 9%, over 2pp worse compared to the January 2015 estimate.

In the RoA, which accounts for 10% of Autoliv’s sales, LVP increased by close to 1%, compared to an increase of close to 2% expected at the beginning of 2015.

In the Americas, which makes up around one third of Autoliv’s sales, LVP decreased by more than 1%, a decrease of 3pp compared to IHS’s growth expectation of 2% from the beginning of the year. In North America, the increase was 2% compared to close to 3% expected at the beginning of the year. In South America, the decrease was close to 16%, more than 13pp worse than the January 2015 estimate.

In Europe, where Autoliv currently generates around one third of its sales, LVP grew by more than 2% which was more than 5pp better than IHS’s estimate in January. In Western Europe, LVP grew by more than 4%, more than 4pp better than estimated at the beginning of the year. In Eastern Europe, LVP decreased by close to 2%, an improvement of close to 7pp compared to the January 2015 estimate.

Consolidated Sales

For the first six months of 2015 consolidated sales decreased to $4,466 million from $4,679 million for the same period in 2014. Excluding currency effects, the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was 5%. All regions of the Company, except China and Japan, showed organic sales growth (non-U.S. GAAP measure, see reconciliation table below) for the first six months.

Sales by Product


Year over year change			Reported (U.S. GAAP)			Currency effects¹⁾			Organic change³⁾
	Sales (MUSD)		Reported (U.S. GAAP)			Currency effects¹⁾			Organic change³⁾
Airbags²⁾	$	2,445.1		(4.0	)%		(9.1	)%		5.1	%
Seatbelts²⁾	$	1,317.4		(7.7	)%		(10.8	)%		3.1	%
Passive Safety Electronics	$	444.6		(7.4	)%		(6.5	)%		(0.9	)%
Active Safety	$	258.5		15.0	%		(13.4	)%		28.4	%
Total	$	4,465.6		(4.6	)%		(9.6	)%		5.0	%

1) Effects from currency translations. 2) Including Corporate and other sales. 3) Non-U.S. GAAP measure, see reconciliation table below.

Sales of airbag products (including steering wheels) were favorably impacted by higher sales of replacement inflators, steering wheels, and inflatable curtains.

Sales of seatbelt products were particularly strong in North America and Europe. The global trend towards more advanced and higher value-added seatbelt systems continued globally.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) for passive safety electronics products (mainly airbag control modules and remote sensing units) were virtually flat.

The strong increase in sales of active safety products (automotive radars, night vision systems and cameras with driver assist systems) resulted from growth particularly for radar related products primarily as a result of Mercedes’ increased demand for driving assistance. Sales of vision systems to BMW also contributed.

Reconciliation of the change in “Organic sales” to U.S. GAAP financial measure

Components of net sales increase (decrease)

Six months ended June 30, 2015

(Dollars in millions)


	Airbag Products²⁾						Seatbelt Products²⁾						Passive Safety Electronics						Active Safety						Total
	%			$			%			$			%			$			%			$			%			$
Organic change		5.1		$	130.5			3.1		$	43.9			(0.9	)	$	(4.4	)		28.4		$	63.8			5.0		$	233.8
Currency effects¹⁾		(9.1	)		(232.0	)		(10.8	)		(153.9	)		(6.5	)		(31.0	)		(13.4	)		(30.1	)		(9.6	)		(447.0	)

Reported change		(4.0	)	$	(101.5	)		(7.7	)	$	(110.0	)		(7.4	)	$	(35.4	)		15.0		$	33.7			(4.6	)	$	(213.2	)

1) Effects from currency translations. 2) Including Corporate and other sales.

Sales by Region


Year over year change				Reported (U.S. GAAP)			Currency effects¹⁾			Organic change²⁾
		Sales (MUSD)		Reported (U.S. GAAP)			Currency effects¹⁾			Organic change²⁾
Asia		$	1,479.8		(4.2	)%		(5.2	)%		1.0	%
Whereof:	China	$	720.1		(1.7	)%		(0.9	)%		(0.8	)%
	Japan	$	306.7		(16.3	)%		(14.8	)%		(1.5	)%
	Rest of Asia	$	453.0		1.7	%		(4.1	)%		5.8	%
Americas		$	1,570.0		1.7	%		(4.0	)%		5.7	%
Europe		$	1,415.8		(11.0	)%		(19.2	)%		8.2	%
Global		$	4,465.6		(4.6	)%		(9.6	)%		5.0	%

1) Effects from currency translations. 2) Non-U.S. GAAP measure, see reconciliation table below.

For the first six months of 2015, sales in the Americas represent 35% of total sales, Asia (China, Japan, RoA) 33%, and Europe 32%. Sales continue to be balanced across the regions. Growth was particularly strong in Europe and North America.

Sales from Autoliv’s companies in China declined organically (non-U.S. GAAP measure, see reconciliation table below) by close to 1%. This was the result of a negative model mix combined with unfavorable model transitions, which was partly mitigated by strong sales to certain local OEMs.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) from Autoliv’s companies in Japan declined by close to 2% in the first six months. The decline was primarily driven by the lower vehicle production, which was almost entirely offset by sales of replacement inflators and strong sales of models from Nissan and Lexus.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) from Autoliv’s companies in the RoA grew by close to 6%. The growth was primarily driven by strong sales growth in Thailand, primarily with models from Mitsubishi and Isuzu, along with sales growth in India driven by models from Hyundai.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) from Autoliv’s companies in the Americas increased by close to 6% and were positively impacted by sales growth to non-US OEM’s in North America, mainly models from Hyundai/Kia, Mercedes, Honda and Acura, sales of replacement inflators also contributed.

Organic sales (non-U.S. GAAP measure, see reconciliation table below) from Autoliv’s companies in Europe increased rapidly by more than 8%. Models from VW, Mercedes, Ford, Fiat, Jeep and Jaguar-Land Rover were the strongest growth contributors.

Reconciliation of the change in “Organic sales” to U.S. GAAP financial measure

Components of net sales increase (decrease)

Six months ended June 30, 2015

(Dollars in millions)


	China						Japan						RoA						Americas						Europe						Total
	%			$			%			$			%			$			%			$			%			$			%			$
Organic change		(0.8	)	$	(6.0	)		(1.5	)	$	(5.4	)		5.8		$	26.0			5.7		$	88.1			8.2		$	131.1			5.0		$	233.8
Currency effects¹⁾		(0.9	)		(6.6	)		(14.8	)		(54.2	)		(4.2	)		(18.5	)		(4.0	)		(61.5	)		(19.2	)		(306.2	)		(9.6	)		(447.0	)

Reported change		(1.7	)	$	(12.6	)		(16.3	)	$	(59.6	)		1.6		$	7.5			1.7		$	26.6			(11.0	)	$	(175.1	)		(4.6	)	$	(213.2	)

1) Effects from currency translations.

Earnings


(Dollars in millions, except per share data)	Six months ended June 30, 2015			Six months ended June 30, 2014			Change
Net Sales	$	4,465.6		$	4,678.8			(4.6	)%

Gross profit	$	883.4		$	909.5			(2.9	)%
% of sales		19.8	%		19.4	%		0.4pp

S,G&A	$	(201.8	)	$	(207.1	)		(2.6	)%
% of sales		(4.5	)%		(4.4	)%		(0.1)pp

R,D&E net	$	(266.8	)	$	(277.0	)		(3.7	)%
% of sales		(6.0	)%		(5.9	)%		(0.1)pp

Operating income	$	288.7		$	331.1			(12.8	)%
% of sales		6.5	%		7.1	%		(0.6)pp

Income before taxes	$	259.0		$	307.2			(15.7	)%

Tax rate		33.4	%		30.2	%		3.2pp

Net income	$	172.5		$	214.3			(19.5	)%

Net income attributable to controlling interest	$	172.4		$	213.1			(19.1	)%

Earnings per share, diluted¹⁾	$	1.95		$	2.27			(14.1	)%

1) Assuming dilution and net of treasury shares.

Gross profit for the first six months 2015 decreased by $26 million, primarily as a result of negative currency translation impact. Gross margin increased by 0.4pp compared to the same period 2014, mainly as a result of positive currency effects and positive product mix partly offset by costs related to the investments for capacity and growth.

Operating income decreased by $42 million to $289 million. Operating margin was 6.5% for the first half of the year, a decline of 0.6pp compared to the same period prior year. The lower operating margin was primarily a result of higher costs related to the ongoing capacity alignment and for settlements of antitrust related matters, as well as increased R,D&E costs. The negative effects were partly offset by favorable currency effects, as well as lower raw material prices.

Selling, General and Administrative (S,G&A) expenses decreased by more than $5 million.

R,D&E expenses, net decreased by more than $10 million compared to the same period prior year. At comparable currency rates the increase in R,D&E, net was more than $10 million mainly driven by increases in Electronics.

Income before taxes decreased by $48 million to $259 million, $6 million more than the decrease in operating income, mainly due to higher interest expense.

Net income attributable to controlling interest amounted to $172 million compared to $213 million for the first six months of 2014. Income tax expense was $87 million compared to $93 million in 2014. The effective tax rate was 33.4% compared to 30.2% for the same six month period last year. Discrete tax items, net, decreased the tax rate in 2015 by 0.7pp, compared to the same period in 2014 when discrete tax items, net increased the tax rate by 0.7pp.

EPS amounted to $1.95 assuming dilution compared to $2.27 for 2014. EPS assuming dilution was negatively affected by capacity alignments and legal costs by 48 cents. This negative effect was mainly offset by lower number of shares outstanding by 11 cents.

The weighted average number of shares outstanding assuming dilution decreased to 88.4 million compared to 92.4 million for the full year 2014.

LIQUIDITY AND SOURCES OF CAPITAL

Cash flow from operations during the second quarter amounted to $154 million compared to $86 million in the same quarter of 2014. The increase was primarily related to the payment of antitrust settlement amounts in the second quarter of 2014 affecting the year over year comparison. Cash flow from operations less net cash used in investing activities for the second quarter 2015 was $39 million compared to negative $29 million during the same quarter of 2014, a difference of $68 million. Capital expenditures, net, of $109 million were $33 million more than depreciation and amortization expense in the quarter and $5 million less than capital expenditures during the second quarter of 2014.

Operations in the first six months of 2015 generated $238 million in cash. For the first six months of 2015 cash flow from operations less net cash used in investing activities was negative $8 million. This compares to $271 million and $62 million, respectively, for the same period in 2014. The decrease was mainly due to the higher payment of antitrust and capacity alignment related costs. Capital expenditures net, amounted to $237 million and depreciation and amortization totalled $150 million for the first six months of 2015 compared to $207 million and $151 million, respectively, for the same period in 2014.

The Company uses the non-U.S. GAAP measure “Operating working capital,” as defined in the table below, in its communications with investors and for management’s review of the development of the working capital cash generation from operations. The reconciling items used to derive this measure are, by contrast, managed as part of the Company’s overall cash and debt management, but they are not part of the responsibilities of day-to-day operations’ management.

Reconciliation of “Operating working capital” to GAAP financial measure

(Dollars in millions)


	June 30, 2015			December 31, 2014
Total current assets	$	4,044.1		$	4,136.2
Total current liabilities		(2,225.3	)		(2,138.6	)

Working capital		1,818.8			1,997.6
Cash and cash equivalents		(1,323.3	)		(1,529.0	)
Short-term debt		93.2			79.6
Derivative (asset) and liability, current		1.2			(0.8	)
Dividends payable		49.3			47.9

Operating working capital	$	639.2		$	595.3

During the second quarter, operating working capital (non-U.S. GAAP measure, see reconciliation table above) increased to 7.1% of sales from 6.3% on March 31, 2015. The increase was due to timing of payments. The Company targets that working capital in relation to the last 12-month sales should not exceed 10%.

Account receivables decreased in relation to sales to 72 days outstanding from 76 days outstanding on March 31, 2015, but increased from 71 days outstanding on June 30, 2014. Days inventory outstanding was 31 days, unchanged from March 31, 2014, but up from 30 days on June 30, 2014.

As part of efficiently managing the Company’s overall cost of funds, we routinely enter into “debt-related derivatives” (DRD) as part of our debt management. Creditors and credit rating agencies use net debt adjusted for DRD in their analyses of the Company’s debt. DRD are fair value adjustments to the carrying value of the underlying debt. Included in the DRD is also the unamortized fair value adjustment related to a discontinued fair value hedge which will be amortized over the remaining life of the debt. By adjusting for DRD, the total financial liability of net debt is disclosed without grossing debt up with currency or interest fair values.

Reconciliation of “Net debt” to GAAP financial measure

(Dollars in millions)


	June 30, 2015			March 31, 2015			December 31, 2014
Short-term debt	$	93.2		$	124.3		$	79.6
Long-term debt		1,505.6			1,511.0			1,521.2

Total debt		1,598.8			1,635.3			1,600.8
Cash and cash equivalents		(1,323.3	)		(1,364.1	)		(1,529.0	)
Debt-related derivatives		(7.0	)		(7.2	)		(10.0	)

Net debt	$	268.5		$	264.0		$	61.8

The Company’s net debt position (non-U.S. GAAP measure, see reconciliation table above) increased by $5 million during the quarter to $269 million at June 30, 2015. Gross interest-bearing debt decreased by $36 million to $1,599 million. Autoliv’s net debt (non-U.S. GAAP measure, see reconciliation table above) increased by $207 million to $269 million compared to December 31, 2014.

Calculation of “Leverage ratio”

(Dollars in millions)


	June 30, 2015		December 31, 2014
Net debt¹⁾	$	268.5	$	61.8
Pension liabilities		229.4		232.5

Debt per the Policy	$	497.9	$	294.3
Income before income taxes ²⁾	$	618.8	$	667.0
Plus: Interest expense, net ^2,3)		68.3		58.6
Depreciation and amortization of intangibles ^2,4)		304.3		305.4

EBITDA per the Policy	$	991.4	$	1,031.0
Leverage ratio		0.5		0.3

1) Net debt is short- and long-term debt and debt-related derivatives less cash and cash equivalents.

2) Latest 12-months.

3) Interest expense, net is interest expense including cost for extinguishment of debt, if any, less interest income.

4) Including impairment write-offs, if any.

Autoliv’s policy is to maintain a leverage ratio (non-U.S. GAAP measure, see calculation in the table above) commensurate with a strong investment grade credit rating. The Company measures its leverage ratio as net debt (non-U.S. GAAP measure, see reconciliation table above) adjusted for pension liabilities in relation to EBITDA (earnings before interest taxes depreciation and amortization). The long-term target is to maintain a leverage ratio of around 1x within a range of 0.5x to 1.5x. As of June 30, 2015 the Company had a leverage ratio of 0.5x.

During the second quarter of 2015, total equity increased by $115 million to $3,341 million due to $137 million from net income, $20 million from positive currency effects and $6 million from common stock incentives. These positive effects were partly offset by $49 million for dividends in the second quarter of 2015. Total parent shareholders’ equity was $3,326 million corresponding to $37.75 per share as of June 30, 2015. Total equity decreased by $101 million during the first six months of 2015 compared to December 31, 2014, due to $104 million from repurchased shares, $98 million from dividends and around $91 million from negative currency effects. These unfavorable effects were offset by net income of $172 million and common stock incentives of $17 million.

Headcount


	June 30, 2015			March 31, 2015			June 30, 2014
Headcount		62,018			61,056			58,810
Whereof: Direct workers in manufacturing		72	%		72	%		72	%
Low Cost Countries		74	%		74	%		72	%
Temporary personnel		15	%		15	%		17	%

Compared to March 31, 2015 total headcount (permanent employees and temporary personnel) increased by around 1,000 people. Close to 300 of these people were in high cost countries.

SEGMENT DATA

Commencing with the period starting January 1, 2015, the Company reports its results under two new segments, Passive Safety and Electronics. Passive Safety includes Autoliv’s airbag and seatbelt businesses, while Electronics integrates all of Autoliv’s electronics resources and expertise in both passive safety electronics and active safety in one organization. Corporate sales and income, capital expenditure and depreciation and amortization for the reportable segments can be found in Note 13 Segment Reporting to this report.

Passive Safety


(Dollars in millions)	Three months ended June 30, 2015			Three months ended June 30, 2014			Change			Organic change¹⁾
Segment sales	$	1,925.3		$	2,013.8			(4.4	)%		5.7	%
Segment operating income	$	195.7		$	110.3			77.5	%
Segment operating margin		10.2	%		5.5	%		4.7	pp

1) Non-U.S. GAAP measure, see reconciliation table below.

Consolidated sales declined by more than 4% to $1,925 million compared to $2,014 million in the same quarter of 2014. Excluding negative currency translation effects of $203 million, the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was close to 6%. All regions except China showed organic growth in the quarter. The higher margin was a result of benefits from the higher organic sales, positive product mix and favorable raw material prices as well as lower costs for antitrust related matters compared to the same quarter last year.


(Dollars in millions)	Six months ended June 30, 2015			Six months ended June 30, 2014			Change			Organic change¹⁾
Segment sales	$	3,755.7		$	3,965.3			(5.3	)%		4.4	%
Segment operating income	$	258.9		$	266.0			(2.7	)%
Segment operating margin		6.9	%		6.7	%		0.2	pp

Consolidated sales declined by more than 5% to $3,756 million compared to $3,965 million in the same period of 2014. Excluding negative currency translation effects of $384 million, the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was more than 4%. The organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was primarily driven by higher sales in Europe and North America. The reported operating margin for the segment was negatively affected by the antitrust related settlement costs and restructuring costs, primarily related to the on-going European capacity alignment program

Electronics


(Dollars in millions)	Three months ended June 30, 2015			Three months ended June 30, 2014			Change			Organic change¹⁾
Segment sales	$	377.1		$	380.5			(0.9	)%		8.3	%
Segment operating income	$	11.9		$	18.1			(34.3	)%
Segment operating margin		3.2	%		4.8	%		(1.6	)pp

1) Non-U.S. GAAP measure, see reconciliation table below.

Consolidated sales were slightly negative compared to the same quarter of 2014. Excluding negative currency translation effects of $35 million, the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was more than 8%. The organic sales growth (non-U.S. GAAP measure, see reconciliation table below) in electronics was a result of the 26% organic sales growth (non-U.S. GAAP measure, see reconciliation table below) in active safety coming from Europe and North America, particularly from premium brands. Sales for passive safety electronics was virtually flat as a result of an increase with Hyundai/Kia in South Korea offset by a decrease in Japan. The lower margin was a result of higher R,D&E costs, and negative currency transaction effects.


(Dollars in millions)	Six months ended June 30, 2015			Six months ended June 30, 2014			Change			Organic change¹⁾
Segment sales	$	728.3		$	735.3			(1.0	)%		8.0	%
Segment operating income	$	20.9		$	36.8			(43.3	)%
Segment operating margin		2.9	%		5.0	%		(2.1	)pp

Consolidated sales declined by 1% compared to the same period 2014. Excluding negative currency translation effects of $66 million, the organic sales growth (non-U.S. GAAP measure, see reconciliation table below) was 8%. The organic sales growth (non-U.S. GAAP measure, see reconciliation table below) in electronics was a result of the 28% organic sales growth (non-U.S. GAAP measure, see reconciliation table below) in active safety coming mainly from radar system sales to Mercedes and vision system sales to BMW. Organic sales (non-U.S. GAAP measure) of passive safety electronics declined by almost 1%. The lower margin was a result of higher R,D&E costs, and negative currency transaction effects.

Reconciliation of the change in “Organic sales” to U.S. GAAP financial measure

Components of net sales increase (decrease)

Three months ended June 30, 2015

(Dollars in millions)


	Passive Safety						Electronics						Other and eliminations			Total
	%			$			%			$			$			%			$
Organic change		5.7		$	114.3			8.3		$	31.7		$	(0.9	)		6.1		$	145.1
Currency effects¹⁾		(10.1	)		(202.9	)		(9.2	)		(35.1	)		1.4			(9.9	)		(236.6	)

Reported change		(4.4	)	$	(88.6	)		(0.9	)	$	(3.4	)	$	0.5			(3.8	)	$	(91.5	)

1) Effects from currency translations.

Reconciliation of the change in “Organic sales” to U.S. GAAP financial measure

Components of net sales increase (decrease)

Six months ended June 30, 2015

(Dollars in millions)


	Passive Safety						Electronics						Other and eliminations		Total
	%			$			%			$			$		%			$
Organic change		4.4		$	174.4			8.0		$	58.7		$	0.7		5.0		$	233.8
Currency effects¹⁾		(9.7	)		(384.0	)		(9.0	)		(65.7	)		2.7		(9.6	)		(447.0	)

Reported change		(5.3	)	$	(209.6	)		(1.0	)	$	(7.0	)	$	3.4		(4.6	)	$	(213.2	)

1) Effects from currency translations.

Headcount


	June 30, 2015		March 31, 2015		December 31, 2014		June 30, 2014
Headcount Passive Safety segment		58,112		57,316		56,327		55,177
Headcount Electronics segment		3,770		3,607		3,570		3,518

The growth in passive safety headcount was in direct labor, which was needed to handle the sales growth. In Electronics the headcount increase from December 31, 2014 as well as from March 31, 2015 came mainly from the planned hiring of electronics engineers, which will continue throughout the year.

Outlook

Mainly based on our customer call-offs we expect organic sales for the third quarter of 2015 to grow by more than 7% compared to the same quarter of 2014. Currency translations are expected to have a negative effect of more than 9%, resulting in a consolidated sales decline of less than 2%. The adjusted operating margin, excluding acquisitions and costs for capacity alignments, antitrust and related matters, is expected to be around 9%.

The indication for the full year is for an organic sales growth of more than 6%. Consolidated sales are expected to decline by close to 2% as effects from currency translations are expected to be negative by more than 8%. The indication for the adjusted operating margin is around 9.5%, excluding acquisitions and costs for capacity alignments antitrust and related matters.

Autoliv has agreements with several OEMs for supply of replacement airbag inflators for delivery. Based on customer agreements and our own expectations we now expect delivery volumes of up to 20 million units mainly in 2015 and 2016. It remains too early in this evolving situation to be able to estimate final volumes.

Our capacity alignment program continues and the Company now expects the costs for the program to be more than $90 million for the full year 2015 due to increased activities compared to the previous estimate.

The projected tax rate, excluding any discrete items, for the full year 2015 is currently expected to be around 31% and is subject to change due to any other discrete or nonrecurring events that may occur.

Operational cash flow for the full year is expected to remain strong and to be around $0.8 billion excluding antitrust related matters and any other discrete items. Capital expenditures in support of our growth strategy are expected to be 5-6% of sales for the full year, which is an increase from the normal level of 4-5% of sales mainly due to the replacement inflator business.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial position, results of operations or cash flows.

OTHER RECENT EVENTS

Launches in the Second Quarter 2015

Honda’s new Pilot

Inflatable curtains, side airbags, seatbelts with pretensioners and radar system.

Haval’s new H8

Driver airbag with steering wheel, passenger airbag, inflatable curtains, side airbags, safety electronics and seatbelts with pretensioners.

Mercedes’ new GLC

Active seatbelts with pretensioners and radar system.

VW’s new Touran

Passenger airbag, side airbags and active seatbelts with pretensioners.

Ford’s new Taurus

Passenger airbag, inflatable curtains, side airbags and safety electronics.

Renault’s new Kadjar

Driver airbag with steering wheel, inflatable curtains, side airbags and safety electronics.

Haima’s new M6

Driver airbag with steering wheel, passenger airbag, inflatable curtains, side airbags, safety electronics and seatbelts with pretensioners.

Jaguar’s new XF

Seatbelts with pretensioners and hood lifter for pedestrian protection.

Kia’s new Optima/K5

Active seatbelts with pretensioners.

Other Events

•

On June 4, Autoliv announced that it had earned Ford Motor Company’s 2014 Safety Supplier of the Year and 2014 Gold Supplier of the Year for its facility in La Pobla de Vallbona, Spain.

•

Autoliv will hold its Capital Markets Day on October 1-2, 2015.

•

On July 6, 2015, the Brazilian antitrust authority (“CADE”) announced an investigation of an alleged cartel involving sales in Brazil of seatbelts, airbags and steering wheels by the Company’s Brazilian subsidiary and the Brazilian subsidiary of a competitor. The Company’s policy is to cooperate with governmental investigations. We cannot predict the duration, scope or ultimate outcome of this matter.

•

On July 16, 2015 Autoliv and Volvo Car Corporation (VCC) signed a license agreement for advanced driver assistance algorithms. Autoliv will pay a license fee to VCC in order to get access to certain active safety features.

Among the advanced driver assistance algorithms included in the agreement are Automatic Emergency Braking for both pedestrian and vehicles, meeting EuroNCAP 2016 requirements, Lane Keep Assist, Automatic Cruise Control, Pilot Assist, Rear Collision Warning and Mitigation, Distance alert and Road sign information.

Together with Autoliv’s own algorithms sensors and control systems, the license agreement with a world leading car manufacturer strengthens the Company’s active safety offering to all automotive manufacturers.

•

On July 16, 2015, Autoliv ASP entered into a Stock Purchase Agreement (the “Purchase Agreement”) with M/A-COM Technology Solutions Inc. (“Seller”), M/A-COM Auto Solutions Inc. (“M/A-COM Auto”) and, for the limited purposes set forth therein, M/A-COM Technology Solutions Holdings, Inc. (“Holdings”), pursuant to which Autoliv ASP will purchase all of the common stock of M/A-COM Auto from Seller. Prior to the closing and pursuant to a separate Contribution Agreement, Seller and Holdings will transfer to M/A-COM Auto all of the assets and certain liabilities of the automotive module business of Seller and Holdings, which designs, develops and sells integrated global positioning system modules and electronic horizon control units for commercial automotive applications.

Autoliv ASP will pay in cash a purchase price of $100 million, subject to adjustments for working capital, outstanding indebtedness of M/A-COM Auto and certain other expenses related to the transaction. In addition to the purchase price, Autoliv ASP agreed to pay Seller an earn-out payment of up to a total of $30 million based on the achievement of revenue-based benchmark amounts for electronic horizon control units through September 30, 2019 as specified in the Purchase Agreement. In addition, Seller has agreed to perform consulting services for Autoliv ASP over a 2-year period for up to a total of $15 million in fees pursuant to a separate consulting agreement.

The entire amount paid for the Company, including the base purchase price and any amounts paid as part of the earn-out pursuant to the Purchase Agreement and any amounts paid pursuant to the Consulting Agreement, will be treated as part of the purchase price for accounting purposes.

The consummation of the transactions contemplated by the Stock Purchase Agreement, which is subject to customary closing conditions (including expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), is expected to occur during the third quarter of 2015.

Dividend

On May 5, 2015, the Company declared a quarterly dividend to shareholders of 56 cents per share for the third quarter 2015 with the following payment schedule:


Ex-date (common stock)		August 18, 2015
Ex-date (SDRs)		August 19, 2015
Record Date		August 20, 2015
Payment Date		September 3, 2015

Next Report

Autoliv intends to publish the quarterly earnings report for the third quarter of 2015 on Friday, October 23, 2015.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

As of June 30, 2015, the Company’s future contractual obligations have not changed materially from the amounts reported in the Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 19, 2015.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Other than as noted below, as of June 30, 2015, there have been no material changes to the information related to quantitative and qualitative disclosures about market risk that was provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 19, 2015.

Transaction Exposure and Revaluation Effects.

Transaction exposure arises when transactions have terms which are denominated in a currency other than the entity’s functional currency. Revaluation effects come from the valuation of assets and liabilities of each unit denominated in other currencies other than the functional currency. The Company’s gross transaction exposure forecasted for 2015 is approximately $2.7 billion. A part of the currency flows have counter-flows in the same currency pair, which reduces the net exposure to approximately $2.1 billion per year. In the four largest net exposures, Autoliv expects to sell U.S. dollars against the Mexican Peso (16% of total net exposure), Euros against the Swedish Krona (16% of total net exposure), U.S. dollars against Korean won (10% of total net exposure) and buy Euros against the Chinese Renminbi (6% of total net exposure). Together these currencies are expected to account for almost 50% of the Company’s net currency transaction exposure. Since the Company can only effectively hedge these currency flows in the short term, periodic hedging would only reduce the impact of fluctuations temporarily. Over time, periodic hedging would postpone but not reduce the impact of fluctuations. In addition, the net exposure is limited to less than one quarter of net sales and is made up of more than 40 different currency pairs with exposures in excess of $1 million each. Autoliv does not hedge these net transaction flows. However, the Company may, from time to time, hedge certain specific transaction flows. At June 30, 2015 there were foreign exchange forward contracts outstanding, designated as cash flow hedges, with a nominal value of $89 million. There were no such contracts outstanding at March 31, 2015.

ITEM 4.

CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures

An evaluation has been carried out, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

(b)	Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For further discussion of legal proceedings, see Note 11 Contingent Liabilities – Legal Proceedings to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Litigation is subject to many uncertainties, and the outcome of any litigation cannot be assured. After discussions with counsel, it is the opinion of management that the litigation to which the Company is currently a party will not have a material adverse impact on the consolidated financial position of Autoliv. The Company may, however, experience material product liability or other losses in the future.

The Company believes that it is currently adequately insured against product and other liability risks at levels sufficient to cover potential claims. The level of coverage may, however, be insufficient in the future or unavailable on the market.

ITEM 1A.

RISK FACTORS

Except as set forth below, as of June 30, 2015, there have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 19, 2015.

Exchange rate risks

In addition, as a result of our global presence, a significant portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. We are therefore subject to foreign currency risks and foreign exchange exposure. Such risks and exposures include

•

transaction exposure, which arises because the cost of a product originates in one currency and the product is sold in another currency;

•

revaluation effects, which arises from valuation of assets denominated in other currencies than the reporting currency of each unit;

•

translation exposure in the income statement, which arises when the income statements of non-U.S. subsidiaries are translated into U.S. dollars;

•

translation exposure in the balance sheet, which arises when the balance sheets of non-U.S. subsidiaries are translated into U.S. dollars; and

•

changes in the reported U.S. dollar amounts of cash flows.

For example, the financial crisis during 2008-2009 caused extreme and unprecedented volatility in foreign currency exchange rates. More recently, there has been significant volatility in certain currency pairs during 2012-2015, and particularly in the early part of 2015. Such fluctuations may occur again and may impact our financial results. We cannot predict when, or if, this volatility will cease or the extent of its impact on our future financial results. We typically denominate foreign transactions in foreign currencies to achieve a natural hedge. However, a natural hedge cannot be achieved for all our currency flows therefore a net transaction exposure remains within the group. The net exposure can be significant and creates a transaction exposure risk for the Company. We may engage in hedging transactions from time to time in the future relating to foreign currency exchange rates.

Additionally, our electronics business is particularly vulnerable to a strong U.S. dollar as raw materials and components are sourced in U.S. dollars while sales are also currently in other currencies, like the Euro. The Company does not hedge translation exposure. Furthermore, growth markets are more likely to utilize foreign currency restrictions that govern the transfer of funds out of such countries.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock repurchase program

During the second quarter of 2015, Autoliv made no stock repurchases. The Company is authorized to purchase up to 47.5 million shares of common stock under the stock repurchase program, which was first approved by the board of directors of the Company on May 9, 2000 and reactivated during the fourth quarter of 2013. Under the existing authorizations, another 4.4 million shares may be repurchased. The share repurchase program does not have an expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS


Exhibit No.		Description

3.1		Autoliv’s Restated Certificate of Incorporation, as amended, incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 22, 2015).

3.2		Autoliv’s Second Restated By-Laws incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-12933, filing date May 6, 2014).

4.1		Senior Indenture, dated March 30, 2009, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.2		First Supplemental Indenture, dated March 30, 2009, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.2 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.3		Purchase Contract and Pledge Agreement, dated March 30, 2009, among Autoliv, Inc. and U.S. Bank National Association, as Stock Purchase Contract Agent, and U.S. Bank National Association, as Collateral Agent, Custodial Agent and Securities Intermediary, incorporated herein by reference to Exhibit 4.3 to Autoliv’s Registration Statement on Form 8-A (File No. 001-12933, filing date March 30, 2009).

4.4		General Terms and Conditions for Swedish Depository Receipts in Autoliv, Inc. representing common shares in Autoliv, Inc., effective as of August 1, 2011, with Skandinaviska Enskilda Banken AB (publ) serving as custodian, incorporated herein by reference to Exhibit 4.11 to Autoliv’s Registration Statement on Form S-3 (File No. 333-179948, filing date March 7, 2012).

4.5		Second Supplemental Indenture (including Form of Global Note), dated March 15, 2012, between Autoliv, Inc. and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-12933, filing date March 15, 2012).

4.6		Note Purchase and Guaranty Agreement dated April 23, 2014, among Autoliv ASP, Inc., Autoliv, Inc. and the purchasers named therein, incorporated herein by reference to Exhibit 4.6 to the Quarterly Report on Form 10-Q (File No. 001-12933, filing date April 25, 2014).

10.1		Amendment, dated January 27, 2015 to the Finance Contract, dated July 16, 2013, among European Investment Bank, Autoliv AB (publ) and Autoliv, Inc., incorporated herein by reference to Exhibit 10.36 to the Annual Report on Form 10-K (File No. 001-12933, filing date February 19, 2015).

31.1 *		Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2 *		Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of the Chief Executive Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of the Chief Financial Officer of Autoliv, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Net Income; (ii) the Condensed Consolidated Statements of Comprehensive Income: (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to the Condensed Consolidated Financial Statements.

*	Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 17, 2015

AUTOLIV, INC.

(Registrant)


By:		/s/ Mats Wallin

		Mats Wallin
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

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